A ‘Green’ Stimulus Package: An opportunity for a resilient economy
In December 2019, Wuhan, China was battling a mysterious virus. Within months, the virus spread in our interconnected global economy, infecting millions of people, and resulting in numerous deaths. Tens of millions more have lost their jobs as much of the planet remains at a standstill. Governments are stepping up to develop a stimulus package that will help their people weather this storm but the question is, can this stimulus package boost the economy and make it more resilient in the face of a future catastrophe? Can this stimulus package also help us succeed in a low-carbon, 21st-century economy — and not just in terms of being adaptable to the likes of climate change, but further support mitigation?
The answer is surprisingly yes. After all, it is logical to say that since you are going to make a lot of investments, then might as well make them in a strategic way, for example making an economy that is more adaptable and resilient in the face of climate change.
A working paper by Joseph Stiglitz, Cameron Hepburn, a professor of environmental economics at the University of Oxford and climate economist Nicholas Stern has provided an insight on whether stimulus spending will retard or support progress on climate change.
The paper has highlighted the impact of COVID-19 on the economy, and the environment, while also suggesting the difficulty of making strategic investments under the pandemic. Given that the pandemic has created urgent needs, the rescue packages have had to be rapidly acting. Limitations on administrative capacities have affected the design of programs and have been a binding constraint. Despite these limitations, stimulus spending in the past has demonstrated that there is potential to move towards a greener direction. In fact, the stimulus spending of 2009 helped the rise of emerging cleantech companies such as Tesla Inc., which is now the world’s second-most-valuable automaker. Since then, prices for renewable energy have plunged as the number of jobs in the field has surged.
Recovery policies can deliver both economic and climate goals. How so? Some of the obvious recovery investments that would provide co-benefits would include investment in clean physical infrastructure that relies on renewable energy. A benefit of renewable energy is that it doesn’t depend on global supply chains and fossil fuels. After all, every country gets sunlight, but every country doesn’t have a large supply of oil. The current pandemic has created the need to have strong local economies and supplies so that in the event of a lockdown, there are local supplies that can address immediate needs.
Another area where investment is likely to build a strong, robust economy without damaging the environment, is investment in high speed internet. As much as a third of the global workforce will sustain remote working practices part time on a permanent basis once the threat of the coronavirus has abated, according to Global Workplace Analytics. Making high speed internet widely accessible will be a key part of allowing people to work remotely, reducing commutes and the amount of road traffic needed. Less traffic means less energy used, not to mention less road construction and maintenance. But better internet could help build a resilient economy — even resilient to climate change. For example, environmental catastrophes can be addressed or mitigated through smart-city monitoring systems, which could be powered by the internet.
Increasing investing in sectors such as health and sectors that support health will further provide significant benefits in improving livelihoods without necessarily increasing the carbon footprint — relative to investments in manufacturing-heavy sectors. The health sector will also play a key role in our fight against climate change. Climate change affects the social and environmental determinants of health — clean air, safe drinking water, sufficient food and secure shelter. It will thus impact the number of people suffering from malnutrition, malaria, diarrhea and heat stress. Boosting investments in health is likely to benefit us in the event of both a pandemic — and climate change.
Indeed, the pandemic has exposed weak policies and poor investments. Climate change will do the same. While urgency was appropriate in introducing rescue packages during the lockdown phase, there is probably more time to ensure that the recovery packages prioritize the sorts of investments that deliver productive assets for the future. Economic stimulus interventions, if designed with climate and economic resilience in mind, also represent an extraordinary opportunity to simultaneously boost the economy in the short term and make a down payment on a prosperous, resilient future.
